Rate Plunge: Time to Refinance If Your Mortgage Is Above 4%
From Jeff Lazerson of Mortgage Grader in Laguna Niguel.
From Freddie Mac’s weekly survey: The 30-year fixed rate dropped an astonishing 14 basis points, from last week’s 3.87 percent, landing at 3.73 percent. That’s the lowest rate in 19 months and marks the eighth consecutive week of rates below 4 percent.
The 15-year fixed dipped 10 basis points, from last week’s 3.15 percent to 3.05 percent this week.
The Mortgage Bankers Association reports an inexplicable 37 percent drop in application volume on an unadjusted basis from the previous 2 weeks.
BOTTOM LINE: Assuming a borrower gets the average 30-year conforming fixed rate on a $417,000 loan, last year’s rate of 4.51 percent and payment of $2,115 is $189 more than this week’s payment of $1,926.
WHAT I SEE: From rate sheets hitting my desk that are not part of Freddie Mac’s survey: Locally, well qualified borrowers can get an eye-popping 30-year fixed rate at 3.375 percent and 1 point or pay nothing and take 3.75 percent. The 15-year fixed is 2.75 percent at 1 point or 3.25 percent at no-cost.
WHAT I THINK: If I had a nickel for every time I received a phone call over my 29 years originating loans from a consumer saying I should have, would have, and could have pulled the trigger when rates were lower but for…, I would be really rich and really retired.
Rates have taken an incredible swan dive in recent days. Refi-mania is bold and back for sure. Purchase mania is just starting. Just do it. Take procrastination out of your vocabulary.
For refinancers, if your fixed rate is currently over 4 percent, you need to focus, shop around and take action now.
If you have any adjustable-rate mortgage and it’s over 3.5 percent, ditto for you. Either go to fixed or, if you are staying a short period of time, get a lower rate ARM at no-cost.
If you are home shopping, you can always sacrifice a little more for a higher price to take advantage of lower rates. All you are doing is renting money. Don’t haggle too much with the seller over small price differences. You risk some competing buyer coming in right behind you, swooping up the palace that you thought was going to be yours.
Payments are almost $200 less per month than they were one year ago on a $417,000 loan. Maybe your payment is $10 or $20 more per month if you pay more for that house, but you gain big-time through property appreciation.
It almost never makes sense to pay points and fees for your loan. No-cost, no-fee is the way to go.
The only exceptions are relocation buyers who are given points and either use it or lose it or if you have to buy your rate down to qualify. The way mortgages are priced these days, the buy-down cost is almost always too expensive compared to accepting a no-cost loan at a slightly higher rate.
If you pay nothing for your loan, you can refinance again if mortgage rates drop further. It’ll be worth it if you get, say, $100 or more per month reduction in your payment.
